Obamacare and Activist State Courts Drive Up Health Plan Costs

The so-called rate shock from Obamacare has hit Ohio. The state’s Department of Insurance announced last Thursday that the average individual-market health insurance premium in 2014 will cost approximately $420,” per month, “representing an increase of 88 percent.”  “We have warned of these increases,” said Lt. Gov. Mary Taylor. “Consumers will have fewer choices and pay much higher premiums for their health insurance starting in 2014.”  Projected costs ranged from $282.51 to $577.40 for individual health plans. “But for many experts who understand the economics of health insurance, the premium increases are not shocking at all. In August of 2011, the actuarial firm Milliman predicted that the Affordable Care Act would increase individual-market premiums in Ohio by 55 to 85 percent.

Most of these cost increases are not only a matter of red tape and compliance burdens, but also related to cost-shifting (what some might view as robbing Peter to pay Paul), and requirements that insurance cover routine minor expenses, rather than performing insurance’s traditional function of protecting against risk by paying unexpected expenses such as medical treatment for injuries and illnesses.  Wall Street Cheat Sheet’s commentary “Proof that Obamacare ‘Rate Shock’ Is Real” says that “two main drivers” cause most of this increase: Risk pool composition changes will require the young to subsidize the old and the healthy to subsidize the sick; and Obamacare’s expansion of insurance benefits, particularly its required reductions in deductibles and co-pays.”

Health insurance expenses also will go up because of state court rulings that invalidate common-sense limits on meritless lawsuits, such as the Oklahoma Supreme Court’s recent ruling in Wall v. Marouk . In that case, the court struck down a requirement medical malpractice lawsuits not be filed unless they are supported by evidence the physician violated the standard of care (in the form of an expert affidavit), even though such evidence is required for liability.  In so doing, it encouraged nuisance lawsuits that drive up the cost of healthcare by encouraging doctors to order unnecessary tests and practice other forms of costly and unnecessary “defensive medicine.” (The activism of the court’s decision is buttressed by the fact that the same day it did that, the Oklahoma Supreme Court also nullified the state’s general tort reform in its entirety. (Here is some coverage: WLF, TortsProf, Tulsa World, Reuters, NewsOK, Beck (“the Oklahoma Supreme Court was plainly out of control in Ysbrand, and unfortunately it remains out of control to this day”), Douglas v. Cox Retirement Properties).)

Judges seem generally to end up to the left of the president or governor who appoints them — on average, Republican judges are more socially liberal than Republican presidents or governors, although not as liberal as Democratic appointees, and Democratic appointees in turn are both more socially-liberal and more pro-trial lawyer and anti-business than Democratic presidents or governors. And that was true in this case, where the state supreme court invalidated a popular tort reform law backed by essentially all Republicans lawmakers and most Democrats (it passed the legislature by votes of 86-to-13 and 42-to-5), and was signed into law by a moderate Democratic governor (The vote was 7-to-2, with the court’s only justice appointed by a Republican governor, and a moderate Democratic appointee, dissenting in both cases).

The Oklahoma court’s rationale for striking down the medical-malpractice reform law — that it was a discriminatory “special law” that discriminated against malpractice plaintiffs by requiring only people suing over malpractice to submit expert evidence to file a lawsuit — was ridiculous. That requirement simply mirrored substantive law, which also requires malpractice plaintiffs — and not other plaintiffs — to submit expert testimony at some point in the lawsuit to prevail. The requirement struck down simply required such evidence at an earlier stage to discourage nuisance lawsuits from being filed despite a lack of merit in order to extract a settlement.  It also contained an exemption for the indigent to avoid imposing undue financial burdens.

Equally silly was its rationale for striking down the whole tort reform law, which it claimed was “log-rolling” in violation of the state constitution’s “single subject” rule, because the legislature modified many different rules of procedure and state code sections through one law. Never mind that a “single subject” — tort reform — obviously tied together all of the changes into an integrated whole. It is not uncommon for state high courts or legislatures to revise many rules of procedure in one law or revision, to create a more harmonious relationship between them.  If its ruling were taken seriously — as no one expects it to be outside the context of tort reform — it would lead to judicial nullification of existing law on a vast scale. If applying to more than one setting made a law a violation of the single-subject rule, then most state civil-rights laws — some of which are contained in state constitutions — would violate the single subject rule, since they often apply to more than one setting, such as laws that ban racial discrimination in employment, public accommodations, housing and public education.

Obamacare’s architects refused to include legal reforms to reduce the cost of healthcare and the wasteful defensive medicine and unnecessary medical tests that result from it. Senate Majority Leader Harry Reid, who opposed such reforms, said that they would save “only” $54 billion. The Pacific Research Institute estimates just one type of cost that could be reduced through malpractice-lawsuit reform – defensive medicine — costs around $200 billion annually. That’s almost as much as France spends annually on health care; like most countries, France has no punitive damages and fewer lawsuits against doctors.  One reform opposed by liberal lawmakers — setting up specialized health tribunals to hear malpractice cases — would be particularly helpful. Replacing uninformed juries with specialized health courts would provide more consistent rulings from case to case, discourage meritless cases, reduce defensive medicine, and more speedily compensate injured people who truly are victimized by doctors’ carelessness. Such tribunals already exist in countries such as “Sweden, Denmark, Finland, Iceland and New Zealand.”

Obamacare is strangling job creation and will harm life-saving medical innovation. Some employers have stopped hiring because of Obamacare, and others are cutting full-time workers and replacing them with part-time workers to avoid Obamacare mandates that apply to full-time employees. Obamacare caused layoffs in the medical device industry through what even liberal Sen. Al Franken, D-Minn., conceded was a “job-killing tax” that will “impair American competitiveness in the medical device field.” Obamacare will cut employment by an additional 800,000 because of work disincentives and bizarre income-cliffs.